Real Estate Quotes

Real estate markets vary around the country. In a few cities, rental rates are very high when you compare them to purchase prices. In those markets, you could buy at retail prices, pay retail for the financing of the property, and still have cash flow. In most cities, however, rental rates are low when compared to purchase prices. In those markets, you cannot afford to buy at retail prices and get conventional financing because you will not be able to generate enough rent to cover expenses and make a profit. [2004] - Mike Summey

It's nearly impossible to be successful if you buy at retail prices and finance at retail rates. You must show a profit in the first year. For every offer that is accepted, you will have dozens rejected. Some of the best buys we have made have been from sellers who were in difficult financial situations, such as being in the middle of a sticky divorce or trying to dispose of inherited property. Learn your market by making a habit of driving through potential neighborhoods where you may want to invest. You will want to meet with a property manager who knows the area where the property is located and ask how much the property could be rented for if it were in good condition. [2004] - Mike Summey

Find a firm that specializes in managing residential properties. A good place to start your search is with your local telephone directory. You can usually find management companies that provide all these services for a fee of 6 to 12 percent of the rents collected. You should always ask to insert a clause that gives you the right to cancel the agreement with a 30- to 60-day written notice for any reason and to cancel it immediately, without advance notice, if any of the representations in the agreement are breached. [2004] - Mike Summey

Bread and butter properties mean single-family homes that fall in the middle range of rents for your market. They are typically two to four bedrooms, with one to two baths and vary in size from 800 to 1400 square feet in size. They are often located in subdivisions containing a number of similar homes. These attract first-time homebuyers and are by far the best rental properties for new investors to purchase. [2004] - Mike Summey

"Slumlord properties" tend to be located where surrounding conditions make it difficult, if not impossible, to attract higher rents and better-quality tenants. It may be in a neighborhood where surrounding properties have deteriorated; or road, railroad, or industrial noise is a problem; or in a high crime area. These factors make the property undesirable regardless of condition. Our advice: If you don't feel comfortable walking in the neighborhood and talking to the people who live there, don't invest. Avoid properties with undesirable surroundings. Instead, buy undesirable properties with superior surroundings. [2004] - Mike Summey

For beginning investors, properties with fewer problems are the way to start, even though they are hard to find. [2004] - Mike Summey

People are constantly losing jobs, being involved in accidents, suffering illnesses, getting divorced, dying, or suffering a myriad of other events that put them in a position where they need to sell their home or rental properties quickly. When people throughout the area know you and know what you do, you will start receiving calls about these deals rather than having to stumble upon them. [2004] - Mike Summey

Talk with people in the neighborhood. Simply letting them know you are interested in buying in their neighborhood is usually all that is necessary to open a very informative dialogue. They will want to learn more about you and in the process may reveal valuable information on their community during the discussion. There may be water, sewer, drainage, or other problems in the area that are not readily apparent. [2004] - Mike Summey

Pass out your business cards that identify you as a "real estate investor" with a line underneath that reads, "I buy houses, apartments, other income properties." [2004] - Mike Summey

Local boards of Realtors maintain statistics on selling prices as a percentage of listing prices. This difference may range anywhere from 2 to 20 percent. [2004] - Mike Summey

The sellers based the asking price on a recommendation from the real estate broker who listed the properties. Wholesale offers offend some sellers! Don't let seller dissatisfaction deter you from making offers. [2004] - Mike Summey

Wholesale purchases frequently arise from unique situations. Properties that have a waiting list of willing and able buyers ready to pay market values are not usually candidates for wholesale purchases. [2004] - Mike Summey

Since price is so important to many sellers, the use of unconventional financing is a way to negotiate without leaving them feeling "beaten down" on their price. Don't use a standard bank-type note that contains a due-on-sale clause. Also, you should include a clause giving you the right to substitute collateral. [2004] - Mike Summey

There's no doubt that people with financial difficulties make flexible sellers. Failed business ventures, loss of employment, protracted illnesses, accidents, and downturns in the economy are just some of the mishaps that can lead to financial problems. Ask them whether they would consider lowering the price if you let them continue to live there and rent from you. [2004] - Mike Summey

Most of the time lending institutions don't auction properties unless they feel they can come out better than with a negotiated sale. [2004] - Mike Summey

The price of real estate goes up for two simple economic reasons, scarcity and inflation. You can make money speculating in real estate if you spend enough time researching your market, have the capital to risk, can cover the carrying costs, and are fortunate enough for prices to go up rapidly. Of course, you can do the same thing in the stock market too. [2004] - Mike Summey

A large part of buying right is searching for sellers with limited alternatives. When sellers are not under any time pressure, it's hard to get good buys. When they are under a lot of time pressure, you can often get terrific buys. Some of the best buys we've made have been from sellers who called us back weeks after they turned down our original offer ("I hope you get what you're asking, but if you don't, call me.") [2004] - Mike Summey

Net Operating Income (NOI) = Income - Vacancy Factor (until you have experience, a professional property manager will be able to give you a good estimate of the time required to re-rent the property) - Management Fee - Maintenance Reserve (depending on the age and condition of the property, you may want to vary this reserve from 5 to 30 percent or more) - Utilities - Taxes - Insurance - Other Expenses (such as common area maintenance, grounds maintenance, area lighting, and snow removal) [2004] - Mike Summey

A 10 percent return on investment (ROI) may be a very good deal if you can borrow the money to purchase the investment at 6 percent. [2004] - Mike Summey

The key is understanding why terms play a larger role than price when buying investment real estate. In reality, you can let the sellers set the price if they will let you set the terms of payment, or vice versa. [2004] - Mike Summey